COMMISSIONER OF INCOME TAX Vs. MASTER GAURAV DALMIA

JUDGEMENT

(1.) ALL these petitions under s. 256(2) of the IT Act, 1961, can be disposed of by a common order as they raise a common issue.

(2.) ALL the petitions relate to the asst. yr. 1977-78. The petitioners are various members of the Dalmia family. Each of the petitioners purchased during the previous year a certain number of shares in the Dalmia Dairy Industries Limited (DDIL). In seven of these cases, the shares were purchased from a company known as Dalmia Cement (Bharat) Limited (DCB) and in the other three cases, the share, were purchased from a company known as Shevaroy Investment (SI). The shares were of the face value of Rs. 10 and were purchased from DCB on May 25, 1976, at Rs. 10 per share and from SI on February 16, 1977, at Rs. 11.20 per share. The ITO was of the opinion that the real or intrinsic value of these shares on the date of purchase on the break-up value basis was Rs. 292.13 per share. We found that each of the petitioners had a relative who was a director in DCB or SI, as the case may be. He thus concluded that the assessee had been able to purchase for Rs. 10/11.20 a share whose real market value on the date of purchase was Rs. 292.13. He, therefore, held that each of the assessees was assessable on the difference between Rs. 292.13 and Rs. 10/ 11.20, the difference being treated as income by virtue of s. 2(24)(iv) which in so far as is relevant reads as follows:

(3.) LEARNED counsel for the Department also made a point that there was some difference between the shares issued by DDIL in April, 1976, and the shares of DCB which were offered for sale at that time. We have not been able to see any difference, except that since the shares held by DCB were also held during the earlier year, they would have been entitled to the dividends payable in respect thereof for the year 1973-74. Actually, there was no dividend issued by the DDIL for the year 1974-75 in view of there having been losses in the company. But even assuming that there is some difference, there is no justification for treating the market value of the shares to be equal to the break- up value and bringing to assessment the large sums that are in question in the present case.